(I write this post with some sadness. I would not have expected a major progressive politician who obviously cares about global warming to propose a gas tax holiday, which has no public benefits whatsoever and at the same time undermines the entire rationale behind a national climate strategy that includes, as it must, a pricing mechanism for greenhouse gases. Kudos to Sen. Obama for opposing this absurd proposal — double kudos because it might cost him a few votes.)
The gas tax holiday proposed by McCain and Clinton is indefensible. That, of course, is why just about every independent observer has criticized it. The Washington Post and, separately, Huffington Post have catalogued an impressive list of serious critiques, starting with the rather obvious point that in a demand-driven price shock, a gas tax holiday probably won’t even save consumers a penny — it will just enrich the poor, suffering oil companies:
Harvard professor N. Gregory Mankiw, who has written a best-selling textbook on economics, said what he teaches is different from what Clinton and McCain are saying about gas taxes. “What you learn in Economics 101 is that if producers can’t produce much more, when you cut the tax on that good the tax is kept … by the suppliers and is not passed on to consumers,” he said.
Leonard Burman, director of the Tax Policy Center of the Urban Institute and the Brookings Institution, said the laws of the market argue against a tax suspension. “Every summer, the refiners are running full out. If the price fell, people would want to drive more and there would be shortages,” he said. “It’s a basic economic principle that if the supply is fixed, the price is going to be determined by demand.”
House Majority Leader Steny H. Hoyer (D-Md.), who said that the Democratic leadership of Congress has no intention of pursuing the summer tax suspension that Clinton touted. The move “would not be positive,” he said. “The oil companies would just raise their prices.“
NYT‘s Paul Krugman calls the idea “pointless” and “disappointing.” Tom Friedman labeled the plan “so ridiculous … it takes your breath away.” Newsweek‘s Jonathan Alter said,
Hillary Clinton has now joined John McCain in proposing the most irresponsible policy idea of the year — an idea that actually could aid the terrorists.
Now, I wouldn’t go that far — mainly because I don’t think the proposal would actually lower gasoline prices very much and therefore wouldn’t make us depend much more on foreign oil or send much more money overseas to governments who don’t like us. Huffington Post couldn’t find any serious “economic or environmental analyst” who supported the plan.
And, of course, there is that pesky issue of global warming that McCain and Clinton say they care about — a claim seriously undermined by this absurd proposal:
What I am terribly concerned about is that this strongly suggests a President McCain would be prepared to walk away from the price for carbon he plans to impose upon the public — the first time there is a recession after a cap-and-trade bill is passed.
Let’s be very clear — the greatest threat to the long-term health and well-being of this country is unrestricted greenhouse gas emissions. The key strategy that McCain and Obama and Clinton have embraced is a cap on emissions coupled with a trading system that sets a market price for carbon dioxide. That is how you get decarbonization at the lowest possible cost. Now, the greatest threat to the success of a cap and trade system is that somebody might artificially limit the carbon price, either through a safety valve designed into the system or because some weak-kneed President (or Congress) walks away from that price the first time the economy suffers a downturn.
Weak-kneed is the last word I would have used to describe Sen. Clinton — especially since her husband opposed a similarly misguided proposal by Bob Dole in 1996. I hope her campaign will explain how she can be for a gas-tax holiday and for a cap-and-trade system, too. As Kevin Knoblauch, president of the Union of Concerned Scientists, said,
“It sends a confusing message. What’s more helpful is if [politicians] help consumers understand that this isn’t about near-term gas prices, it’s about a comprehensive and smart approach to energy policies.”
Bottom line, as Robert Shapiro, undersecretary of commerce in the Clinton administration, put it:
“Stated as clearly as I can,” he wrote, “it’s utterly misguided both environmentally and economically.”